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A word for the wise. (From today's Eureka Report.)
I wouldn't swap places with James McMurdoch. You may not have heard of McMurdoch, but he's the man at Goldman Sachs JB Were who has been given the unenviable task of sorting out the debacle of BrisConnections, the worst float of 2008. It's not exaggerating to say the future of retail investing in stockmarket listed infrastructure funds is in his hands.
BrisConnections is not suspended, but there is nobody trading in the stock because the stock has slumped from $1 on listing in August to a tenth of a cent today. Worse still, BrisConnections was an “instalment-based” listing with a $1 instalment due next April, and another $1 in April 2010.
And that's just the start of it. Hundreds of investors – including some Eureka Report subscribers – are trapped in the stock. Those who bought huge amounts of stock, often for meagre amounts of cash, now they are facing enormous instalment bills.
Eureka Report subscriber Stephen Lando, a Townsville sugar cane farmer, is typical. He invested in 300,000 units at 3˘ each. His upfront costs were $12,000. Now Lando is facing a bill for $600,000 because each of his untradeable 300,000 units carries a liability for another $2. "I simply don't know what to do,” he says, “but I will not be able to pay $600,000, that's for sure.”
Investors, especially investors and traders who moved into the stock in recent weeks before it froze at a tenth of a cent are now being told by BrisConnections that they could face debt collectors at their door if they do not pay up.
The media has been peppered with BrisConnections “hard luck” stories in recent weeks, some much more heart-rending than Lando’s. But most of those stories were about day traders who rushed into BrisConnections without realising it was an instalment plan share.
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